Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 21, Problem 11PA
Subpart (a):
To determine
Trade-off and it relevance.
Subpart (b):
To determine
Trade-off and it relevance.
Subpart (c):
To determine
Trade-off and it relevance.
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Consider a couple's decision about how many children to have. Assume that over a lifetime a couple has 100,000 hours of time to either work or raise children. The wage is $10 per hour. Raising a child takes 10,000 hours of time.
a. Make a graph with the budget constraint showing the trade-off between lifetime consumption and number of children. (Ignore the fact that children come only in whole numbers!) Show indifference curves and an optimum choice.
b. Suppose the wage increases to $15 per hour. Show how the budget constraint shifts. Using income and substitution effects, discuss the impact of the change on number of children and lifetime consumption.
c. We observe that, as societies get richer and wages rise, people typically have fewer children. Is this fact consistent with this model? Explain.
Public schooling is a "take-it-or-leave-it" option. Individuals are not allowed to supplement public education with private lessons. How would the diagram be modified if parents could purchase additional houses of education for their children who are already enrolled in public school?
a. No change to the diagram
b. The budget constraint shifts to the right and passes point X
c. The budget constraint shifts left and passes point c0
d. The indifference curve shifts down and to the left and passes point x
George has a fixed income and can afford at most 7 units of X if he spends his entire income on X. Alternatively, if he spends all his income on Y, he can afford at most 6 units of Y. Draw George's budget line and an indifference curve such that George chooses to buy 4 pieces of X. Martha has the same income and faces the same prices, yet she chooses to buy 2 pieces of X. In equilibrium, what is George's subjective value of X in terms of Y? What is Martha's?
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Chapter 21 Solutions
Principles of Economics, 7th Edition (MindTap Course List)
Ch. 21.1 - Prob. 1QQCh. 21.2 - Prob. 2QQCh. 21.3 - Prob. 3QQCh. 21.4 - Prob. 4QQCh. 21 - Prob. 1QRCh. 21 - Prob. 2QRCh. 21 - Prob. 3QRCh. 21 - Prob. 4QRCh. 21 - Prob. 5QRCh. 21 - Prob. 6QR
Ch. 21 - Prob. 7QRCh. 21 - Prob. 1QCMCCh. 21 - Prob. 2QCMCCh. 21 - Prob. 3QCMCCh. 21 - Prob. 4QCMCCh. 21 - Prob. 5QCMCCh. 21 - Prob. 6QCMCCh. 21 - Prob. 1PACh. 21 - Prob. 2PACh. 21 - Prob. 3PACh. 21 - Prob. 4PACh. 21 - Prob. 5PACh. 21 - Prob. 6PACh. 21 - Prob. 7PACh. 21 - Prob. 8PACh. 21 - Prob. 9PACh. 21 - Prob. 10PACh. 21 - Prob. 11PACh. 21 - Prob. 12PACh. 21 - Prob. 13PA
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